Batteries are hot. But venture funding for battery technologies has cooled.

In a recent paper, researchers documented the difficulties faced by battery startups. Of the 36 battery startups since 2000 that have received $500,000 or more of venture funding, only half achieved early commercialization, as evidenced by pilot-scale manufacturing or corporate partnerships.

The study’s authors found that only two companies had returned investor capital -- a reason why so many venture capitalists have lost interest in materials, chemicals and process startups.

Source: MRS Energy & Sustainability

The barriers to success ware many: high upfront capital requirements, intellectual property claims, stringent requirements (substitute materials or processes must match or outperform incumbents in several dimensions) and a commoditized market with narrow margins.

Each factor favors the established value chain; together they create a barrier that can seem insurmountable.

Consequently, some battery startups are aiming to integrate production of their technology into the existing supply chain. Rather than upend the whole supply chain, why not aim for a specific process?

Let’s explore two companies taking this approach.

Nano One: Cheaper cathode powders

Canada’s Nano One Materials aims to halve the cost of lithium-ion cathode powders, which account for roughly one-quarter of a battery’s cost. Its goal is to replace lengthy, multi-day incumbent industry processes by synthesizing more homogeneous powders faster, and under milder process conditions.

Source: Lux Research

The six-year-old startup has raised more than CAD $15 million through private placements, research grants and an IPO. (Many Canadian startups access capital as “micro-cap” stocks on the Canadian Venture Exchange; at the time of writing, Nano One’s market capitalization is approximately CAD $70 million.)

Earlier this year, the company completed a pilot facility designed for 10 kilograms of cathode powder per day. It announced in August that lab-demonstrated process improvements could lead to a 100-fold increase in throughput, allowing the pilot equipment to approach commercial production rates.

Most promisingly, the company manufactured lab batches of lithium carbonate-derived nickel-cobalt-aluminum (NCA) and high-nickel nickel-manganese-cobalt (NMC811) powders with specific energies of 710 and 750 Wh/kg, in line with industry-typical figures when lithium hydroxide is used as a precursor. Lithium hydroxide is itself synthesized from lithium carbonate, and bypassing this costly chemical transformation makes the company’s more aggressive cost-reduction claims possible.

Scaling up: Where chemistry goes to die

At the gram scale in test tubes, near-perfect mixing can be achieved, allowing researchers to finesse reaction paths. At the kilogram scale, temperature and concentration gradients emerge, and with them the unwanted side reactions and byproducts that prevent most breakthroughs from leaving the lab.

With lab batches already at kilogram scale and a first pilot batch manufactured at the 10-kilogram scale, Nano One’s process has shown promise for industrial practicality, crossing the threshold of interest-worthiness.

The company mixes lithium- and metal-bearing precursors in an aqueous (water-based) solution, then causes these to co-precipitate (solidify) into nanostructured crystals containing the desired ratio of cathode powder components. (A company patent describes doing so by bubbling gas through a supersaturated solution.) The crystals can then be dried, calcined (heated) and crushed into fine powders.

Common industry practice is to co-precipitate metals into crystals, but this does not ensure the desired atomic-level mixing.

For instance, crystallization of a 1:1:1 nickel-manganese-cobalt mixture in an incumbent process results in a precise 1:1:1 ratio at the bulk level, but the composition of individual particles varies. To create more a homogeneous product, suppliers repeatedly fire, crush and mill the powders in energy-intensive, hours-long processes. (Firing allows the metal atoms to diffuse evenly throughout each particle, but also causes particles to coalesce together, so crushing and milling are required to turn them back into fine powders.)

The additional time and energy add cost, and the powder still won’t be fully homogeneous at the particle level, causing undesired side reactions and byproducts, and ultimately impairing cycle life.

Nano One’s hypothesis is that the superior homogeneity achieved by the structured co-precipitation of cathode components explains the superior cycle life the samples have shown. If verified by industry participants, and if its process can run the gauntlet of commercial adoption, the technology could help lithium-ion batteries continue their steady march down the cost-learning curve.

Source: Nano One

Nano Nouvelle: Foil play

Australian startup Nano Nouvelle is focused on replacing the copper foil current collector used on battery anodes with its Lumafoil porous copper membranes. Though the membranes have higher per-square-meter costs (the copper is deposited onto a porous substrate through electro-less plating), they offer a weight savings over copper foils. More importantly, the membranes’ much-higher surface area stands to reduce downstream processing costs.

Nano Nouvelle estimates its porous membranes can reduce cell assembly costs by 12 percent, corresponding to a 2 to 3 percent reduction in battery costs. While modest on their own, the cumulative effect of such savings throughout the value chain are the basis of learning-curve effects.

As industry moves to ever-thinner current collectors (to reduce costs and improve energy density), porous membranes’ superior processing characteristics may offer a second rationale for adoption.

Thinner metal foils become more prone to wrinkling and tearing, necessitating ever-finer mechanical controls on roll-to-roll process equipment. Porous membranes perform better in both aspects, and are also more resistant to tear propagation. If and when the industry does approach the limits of mechanical controls for thin foils, a shift to more robust current collector materials (for which porous membranes would be an option) will become more likely.

Having provided samples to a number of sector participants, and completed a successful “plug-and-play” processing trial at Oregon’s Polaris Labs, the startup has been raising money for a pilot line to demonstrate the technology’s feasibility at larger scale. Being venture-funded, its likely exit strategy will be to license or sell the technology to a major payer.

The inertia of rapidly falling incumbent costs

For all the promise Nano One's and Nano Nouvelle’s innovations may hold, their technologies still need to clear high hurdles.

Both of their candidate materials aren’t perfectly identical to the incumbents they aim to displace, creating an asymmetric risk for any industry adopters. Implementing cost-cutting innovations from internal teams or trusted suppliers is a lower-risk path for a management team than turning to startups who lack industry roots.

The pace of incumbent-technology improvement may prove a more formidable barrier to these startups, as the accruing advantages of scale may negate the cost advantages of external innovations.

Concentrated photovoltaics are a case in point. Despite being more efficient and requiring less silicon than standard photovoltaics, CPV companies watched their projected cost advantages disappear as traditional crystalline-silicon solar ramped up at a breathtaking scale. The cost drops from that scale offset any advantages presented by CPV.

“With billions of dollars’ worth of capital investments planned to build Tesla Gigafactory-style battery manufacturing plants globally over the next five to eight years, the key question will be whether any of the dozen-plus gigawatt-hour scale manufacturers will take a chance inserting Nano One or Nano Nouvelle's processes into their operations,” said Ravi Manghani, GTM Research’s director of storage.

“Additionally, most of the vendors are also investing in research and development, and working on next-generation battery products, so innovations from startups run the risk of becoming less valuable or applicable to new products or processes from the incumbents,” said Manghani.

Commercialization will always be the ultimate measure of success. But that may not always capture their value to the clean energy ecosystem. Are a startup’s cost targets matched by an incumbent? The benefit to the end user is the same.

Whatever the fates of startups like Nano One and Nano Nouvelle, the hope is that they’ll put competitive pressures on incumbent battery makers -- leading to an acceleration of performance and cost declines.

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Matthew Klippenstein, P.Eng., heads Electron Communications, a cleantech-centric consultancy. He chronicles the Canadian electric car market for GreenCarReports and co-hosts the CleanTech Talk podcast. He does not own shares or conduct business with any of the companies listed above.